Essar Oil, the refining and marketing arm of the Essar group, will more than double its distribution network to 3,000 outlets over the next six quarters, the company’s CEO for oil marketing, S Thangapandian, said.
The firm had shut down all its 1,275 petrol outlets in early 2008 owing to a spike in crude oil prices, but it re-opened them late last year after crude prices eased. Unlike public sector companies, Essar cannot sell oil products below cost in anticipation of government subsidy when crude prices go up.
Thangapandian said the company has decided to go full throttle on its retail strategy, in anticipation of deregulation of fuel prices. “In fact, starting Thursday, we have reduced prices of petrol and diesel in eight states to the same level as public sector companies,” he said.
Essar Oil, along with Reliance Industries and Shell, had acquired oil retailing licences in 2002-03 in return for investments in upstream sectors such as refining and exploration. The government had promised that oil companies will be free to fix retail prices of petroleum products from April 2002 and price control would be done through manipulation of taxes, rather than by capping prices. It, however, failed to stick to its promise.
Thangapandian said Essar has decided to go ahead and make further investments into the petro-retail business on expectations that the government will implement its deregulation promise. The company currently has 300 outlets under construction and expects to take its network to 1,500 pumps by March 2010.
“We were promised that the administered price mechanism will be dismantled in 2002. Based on this promise, we have invested hundreds of crores [of rupees]. But it (price regulation) was brought back through the backdoor through oil bonds... However, we expect the government to implement the recommendations of the Parikh committee… We will continue with our expansion programme in the new year to reach a total of 3,000 outlets by March 2011,” he said.
The Parikh Committee, headed by former Planning Commission member Kirit Parikh, is the third committee set up by the UPA government to suggest ways to resolve the issue of petroleum subsidies and pricing. Recommendations of the earlier committees are yet to be implemented.
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